IRVINE AND SILICON VALLEY, CALIF. – April 26, 2017 – Ten-X, the nation’s leading online real estate transaction marketplace, has released its latest Commercial Real Estate (CRE) Nowcast. The monthly pricing index, which combines Google Trends data, Ten-X’s proprietary transaction data, and investor surveys to forecast CRE pricing trends in real time, revealed that nationwide commercial valuations grew by 1 percent during April, due in part to a slide in interest rates in the lead-up to France’s presidential election. The monthly gain was the industry’s strongest since the U.S. election in November, and pricing across commercial real estate has now risen 9.6 percent over the last 12 months - the strongest rate of annual growth since early 2016.
According to the Nowcast, the hotel sector experienced a surprising pop in pricing, surging 1.3 percent during April. That places prices 1 percent above their April 2016 levels, breaking a streak of 11 consectuive months with negative annual growth readings. Much of the sector’s gains occurred in the Southwest and Southeast, where fundamentals remain strong and supply pipelines are relatively low. Pricing in the Northeast continued to decline, with New York likely weighing down the region owing to its onerous supply pipeline and the new administration’s travel restriction efforts causing a decline in tourism to major gateway markets.
Also posting a significant increase in pricing is the apartment sector, which continued its remarkable run of success in April. Its 1.3-percent growth was on par with its performance the previous two months, and overall pricing is now up 15.1 percent year-over-year. Despite tight cap rate spreads, which indicate that apartment properties may have reached peak value, investors remain bullish on the segment. The Midwest and West regions posted the strongest growth for the month, with the Southwest standing out as the weakest performer. The Southwest’s poor performance is likely due to the economic slowdown in various energy-exposed markets, as oil prices continue their slump.
“April produced promising returns across much of commercial real estate, with an unlikely leader – the hotel sector – setting the pace,” said Ten-X Chief Economist Peter Muoio. “The hotel sector has been stuck in a prolonged slump due to significant incoming supply, changes in consumer behavior and declines in international tourism.”
The Ten-X Office Nowcast also showed a promising increase of 1.1 percent in April, ending a streak of four months with either flat or middling growth. Pricing across the sector now stands 22.4 percent above its year-ago levels, the strongest annual gain since 2014. The country’s labor market remains robust, which should support the continued health of office fundamentals. All regions posted positive growth during April, with the Southwest emerging as the strongest performer.
The retail and industrial sectors lagged behind their counterparts during April, with the Nowcast measuring pricing gains of 0.6 percent and 0.7 percent, respectively. Both have seen moderate increases over the last year, as the Ten-X Industrial Nowcast has risen 5.4 percent and the Retail Nowcast just 4.8 percent. Retail is experiencing its slowest growth since late 2014, due in large part to bankruptcies and store closures of various high-profile retailers. The Industrial sector is strong nationally, with all regions but the Southwest showing gains this month. The ongoing slump in oil prices is restraining that region’s industrial sector, which tempered the segment’s overall growth.
“With uncertainty mounting during the lead-up to France’s election, sliding interest rates gave U.S. commercial real estate a welcome boost during April,” Muoio stated. “While the industry saw its biggest gains since November, investors are staying patient as they await more clarity on the country’s economic and policy outlook under the new federal administration.”
About the Ten-X CRE Nowcast
The Ten-X CRE Nowcast is a price index covering the entire U.S. commercial market, including individual price trends for each major market sector – office, multifamily, retail, industrial and hotel. It is based on data modeling developed by Google Chief Economist Hal Varian, who defines “nowcasting” as “contemporaneous forecasting” – the ability to predict what is happening as it occurs. Ten-X applies Varian’s theories by combining publicly available and anonymous Google Trends data with its own proprietary transactional data to create a model for accurately predicting current commercial real estate activity. This data is supplemented with “real human” input through the company’s partnership with Situs and their Real Estate Research Report (RERC).
Ten-X issues its CRE Nowcast monthly after combining transactional data, related online search activity indicating purchase intent and investor survey results. The company runs multiple versions of the Nowcast model and layers in additional variables every day to improve its accuracy in predicting pricing trends across CRE sectors in key U.S. markets. Future iterations will include regional, local and individual asset-based price indicators. By analyzing current market conditions as opposed to only historical data, Ten-X is able to provide more relevant and timely insight to real estate investors, economists and government entities alike.
Ten-X is the nation’s leading online real estate transaction marketplace and the parent to Ten-X Homes, Ten-X Commercial and Auction.com. To date, the company has sold 275,000+ residential and commercial properties totaling nearly $46 billion. Leveraging desktop and mobile technology, Ten-X allows people to safely and easily complete real estate transactions online. Ten-X is headquartered in Irvine and Silicon Valley, Calif., and has offices in key markets nationwide. Investors in the company include CapitalG (formerly Google Capital) and Stone Point Capital. For more information, visit